Sample short sale.docx by qingyunliuliu


									Moving step-by-step through an actual deal using a high-
  volume business model

Property: 3BR/2BA, 1,500 SF house that needs $5-9K in paint/carpet/cleaning

Debt: $200,000 loan balance, one mortgage

Value: Comps between $140-190K in past six months, estimated $150K sale price

   1. Realtor gets short sale lead. Figures out that the house has no equity, is in the
      right area and the seller has a legitimate hardship. Time to call the Investor.
   2. Realtor emails investor’s assistant and asks her to email back the short sale
   3. Realtor receives package and goes out to meet with the Sellers. She explains to
      them how the process works and that she does short sales with the Investor
      because he gets the process started with A TOP NEGOTIATING FIRM with the
      Bank right away by putting the house under contract for sale and purchase. They
      won’t have to wait weeks for an offer to send to the bank while the Bank inches
      closer to a foreclosure sale.
   4. Realtor gets the Sellers to sign the short sale paperwork and collects all of the
      necessary financial info for an offer to send to the bank while the Bank inches
      closer to a foreclosure sale.
   5. Realtor makes a copy of the package for her broker’s file and gives all original
      documents to Investor’s assistant.
   6. Assistant scans package for Investor’s negotiating company, but at this point we
      will know what will be offered and where to list the property initially knowing that
      we will lower it in 3-4 months.
   7. Assistant emails our real estate agent with instruction to prepare a conservative
      BPO along with an estimate of repairs and pictures of the house.
   8. Realtor puts the property on MLS right away at a higher price than the sweet spot
      range at $169K. Three to four months later, Realtor begins lowering list price into
      sweet spot range. . She has gotten Seller authorization to automatically reduce
      the price to $150K if there are no calls or action within 90 days.
9. Realtor completes his report and emails it to the Assistant to be passed on to the
   negotiating team. Negotiator now has picture of the house, a completed BPO and
   an estimate of repairs. The “quick sale, as-is” BPO comes in at $135K.
10. Realtor emails the Assistant to put together a proposed HUD-1 for the Bank
   indicating a $100K purchase price with a 6% Realtor commission, 6% in seller
   commissions and a 1% negotiation fee. All doc stamps, title fees, prorated items
   and usual & customary costs of sale appear on the seller side, so the Bank nets
   around $82,000. The seller receives $0.
11. The Assistant puts the HUD-1 together and emails it to the negotiator, who is
   now authorized by the Seller to deal with the Bank on the account because the
   Bank has received a signed Authorization to Release form.
12. The BPO Agent looks at the Realtor’s version of a BPO and agrees with the
   $135K value. No calls or showings at this point. We instruct the listing agent to
   lower the price to $150K if there are no calls after 90 days.
13. The Negotiator has submitted the entire short sale package to the Bank and is
   waiting for it to be assigned to a loss mitigator and for the Bank to order its BPO.
14. Now 30 days go by. The Negotiator has made follow-up calls twice a week. The
   Realtor has seen some action on the house but no offers, most likely because it
   is a short sale. The market has taken a slight drop because it is a short sale and
   no one wants to wait around. The market has taken a light drop because two
   REO’s (bank owned properties) down the street just sold for $135K and $145K.
15. The loss mitigator tells the Investor’s negotiator that a BPO has been ordered.
   The negotiator emails the Investor and tells him to get ready with the Realtor and
16. The Realtor updates their BPO to reflect today’s market conditions. With the new
   comps and the increased inventory, the updated BPO comes in at $130K (“quick
   sale, as-is”). We instruct the listing Realtor to lower the price to $145K.
17. The Bank’s BPO agent calls the Negotiator, who puts her touch with the
   Investor’s Realtor and contractor, who schedules the inspection for the following
18. The next day at the house the investor, Realtor and contractor takes a list of the
   repairs, our BPO and a cover letter explaining the situations to date. The Realtor
   states that they’ve sent a $100K offer to Bank, which they realize it is a bit low,
   but that they have had no success in getting a higher offer. The house has been
   on the market for 60 days, currently listed at $145K with no takers. The investor’s
   Realtor shows the Bank’s agent his $130K BPO and explains the comps, repairs
   and market conditions that led him to that valuation. He gladly shares a copy of
   his BPO with the Bank’s agent. The contractor is introduced and he gives the
   banks agent his list of repairs
19. The Realtor calls the Bank’s agent the next day to ask if the report is done and
   what it came in at. The “only reason he wants to know” is so they can make sure
   the house is priced correctly, because he isn’t so sure the $100K offer is going to
   fly. The Bank’s agent says she can’t tell him exactly what is came in at, but
   “hints” that the number was only about $5K off. The Realtor now knows the
   Bank’s value is around $135K and the banks margin is right about 105K
20. The Realtor explains to the investor what has transpired. The Realtor is really
   starting to get a lot of calls on house. The Realtor advises that it would be much
   easier to sell if a few hundred dollars could be spent on debris removal, lawn
   maintenance, and a maid to scrub down the interior. The investor fronts the
   money and it is all done.
21. Another two weeks go by when the Negotiator gets a call from the Bank advising
   that the offer is too low and the needs to be closer to $135K. The Bank also says
   it will only pay 5% commission and will not pay a negotiating fee. Also, they are
   not sure if they could do the requested concession or not and would have to get
   that approved by their Wall Street investor. In response, the Negotiator raises the
   offer to a $125K purchase price, throws out the negotiating fee, and reduces the
   commission to 5% but keeps the concession the same, as well as all normal fees
   and prorations. The net offer to the Bank is now at $105K (just under 80% of the
   BPO) and appears to have a good chance of going through.
22. The investor instructs the Realtor to place the following into the MLS remarks:
   “Short Sale Verbally Approved. Listing agent has received verbal short sale
   approval and just needs full price offer to move forward.” Now the Realtor’s
   phone is ringing. Although there are cheaper houses down the street priced at
   $135K and $145K, they are also short sales and those list prices are not
   approved because the listing agents on those houses A) have done nothing with
   the Bank and B)have no signed offers
23. Another week goes by. The Bank’s loss mitigator says everything looks good,
   except his boss will only approve a 3% concession. The Negotiator says he
   thinks he can make that work and tells the loss mitigator to go ahead and submit
   that for approval. The net offer to the Bank is now right around $109K.
24. The Realtor receives two offers on the house. The first is for $155K, but the
   buyer wants 6% in seller concessions and is getting FHA financing. The second
   offer is for $135K. The buyers are putting down 20% and have a good
   relationship with their Bank. The investor instructs the Realtor to counter the
   $135K offer at $140K.
25. The property goes under contract for $140K with a closing date set for month
   end. However, the contract states that the Seller can extend the closing date an
   additional 30 days (to protect himself in the event the Bank drags its feet on the
   approval letter.) We have a Buyer!
26. Once the payoff demand approval letter is in the hand the Investor tells the
   Realtor to inform the Buyer’s agent to go ahead and order the appraisal and
   inspections, and plan on closing at the end of the month. Investor instructs his
   title company or real estate attorney to prepare as necessary.
27. Another two weeks go by, the end Buyer’s appraisal and inspections are done
   and the Negotiator has a written short sale acceptance. The approval letter is
   good for 30 days and the Buyer can close in two weeks because everything is
   just about done.
28. The A-B transaction closes on the 14th and the B-C transaction closes on the
   15th. The Investor’s net on the B-C sale is around $133K after closing costs, 3%
   to buyers agent and prorated taxes, for a net profit (on the entire short sale and
   subsequent re-sale) of $20K.

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